COVID-19 Pandemic Relief for Nonprofits

In response to the recent COVID-19 pandemic, the federal government has passed legislation to assist businesses, including nonprofit organizations, cope with the current economic disruption.

This webpage will be regularly updated to provide nonprofits with information they will need to avail themselves of this relief.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act creates several loan programs that certain nonprofits are eligible for. The loan programs are intended to help businesses continue to operate during this financially difficult time. Additionally, they are meant to help businesses continue to employ their workers so that individuals can keep their jobs during this time of uncertainty.

In Addition to loan programs, the CARES Act and the Families First Coronavirus Response (FFCR) Act create additional benefits to nonprofit organizations in the form of payroll tax credits, tax filing and deposit extensions, reimbursements for unemployment benefits given to employees, and tax relief to individuals and corporations to encourage donations to charitable organizations. In response to these Acts, California has also created a program to assist employers in maintaining their workforce and has extended tax filing and deposit deadlines.

The programs available to nonprofit organizations described below are:

The Law Firm for Non-Profits is here to help you through this difficult time. If you your organization would like assistance with any of the loan programs or other benefits available to nonprofits, please feel free to reach out to us for assistance.

Paycheck Protection Program for Nonprofits

What is it?

A forgivable loan program available to nonprofits created by the CARES Act

Who is eligible?

501(c)(3) and 501(c)(19) Nonprofit organizations with 500 or fewer employees (including both part-time and full-time employees)

Self-employed individuals

What are lenders looking for?

The COVID-19 pandemic has made the loan request necessary to support your organization’s ongoing operations

Your organization will use the loan proceeds to retain workers and maintain payroll or make mortgage interest, lease, and utility payments

Your organization doesn’t have a loan application pending to help pay for the same expenses that this loan will pay for

Your organization has not, or will not receive a loan to pay for the same expenses from February 15, 2020 to December 31, 2020

How much can be borrowed?

Nonprofits can borrow up to 250% of their average monthly payroll costs

The amount borrowed cannot to exceed $10,000,000

What is included in monthly payroll expenses?

Salaries, wages, commissions, or similar compensation

Cash tips or the equivalent

Payments for vacation, parental, family, medical, or sick leave

Separation or dismissal allowances

Payments of retirement benefits

Payments of state or local taxes assessed on employee compensation.

The following are not included in this calculation:

Compensation of an individual employee in excess of an annual salary of $100,000 (prorated for the period February 15, 2020 to June 20, 2020)

Federal payroll and income taxes

Compensation of employees who reside outside of the United States

Qualified leave wages for which a credit is allowed under the Families First Coronavirus Response Act

For self-employed individuals, the amount is capped at a yearly income of $100,000, pro-rated for the covered period

What can the loan be used for?

Payroll, including health care benefits

Interest payments for mortgages and other debt obligations incurred prior to February 15, 2020

Rent and utilities

When must the loan be paid back?

The loan term is 2 years

Payments can be deferred for 6 months

What is the interest rate on the loan?

The interest rate is 1%

Will the loan be forgiven?

Loan forgiveness is available for the amount spent on the following during the 8-week period beginning on the date of the origination of the loan (not to exceed the principal balance of the loan):

The amount of loan forgiveness will be reduced proportionally if your organization decreases the number of full-time employees it has

The amount of loan forgiveness will also be reduced dollar-for-dollar if your organization decreases the salaries and wages of its employees by more than 25% for any employee making less than $100,000 annually

Your organization has until June 30, 2020 to restore its full-time employment and salary levels, if it made any changes between February 15, 2020 and April 26, 2020